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When Microsoft launched its latest application suite, Office 2000, itwas a somewhat quiet affair. Is it any wonder then that the reaction fromthe channel has also been muted? Paul Bray investigates.

At Microsoft's website is a wish line, where customers are invited to state the features they would like to see in its software. Microsoft Office, its flagship desktop productivity suite, has received more than a million requests, which is hardly surprising given that about 80 million copies have been sold worldwide. What is surprising is that many of the requests are already provided within existing versions of Office - people just haven't found them yet.

Some might be tempted to leave it there. But Microsoft - never able to resist cramming in an extra feature - went right on and produced Office 2000, which it launched with a barely audible fanfare and minimal pizzazz on 8 June.

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Most of the component applications have received minor improvements, but the main changes have been in web-enabled collaboration - aimed mostly at sharing documents over an intranet - and improved management features (see box, page 30). These are most likely to appeal to businesses with large networks. Steve Caunce, software marketing manager at Computacenter, says: "Our view is that Office 2000 is very much a release for the corporate customer rather than the home customer."

Microsoft disagrees. David Bennie, product marketing manager for Office at Microsoft, says: "We've said Office 2000 is totally scalable, from one person working at home to a multinational with 40,000 employees. You'd just use a different feature set."

In adding extra web features, Microsoft seems to be swimming with the tide and many resellers are positive. "We could see an increase in sales because of the internet features," says Ian Brooks, managing director of Cardiff reseller IB Business Development. "It's so seamless, you almost have an intranet whether you want it or not."

But analysts are not so sure. A Gartner Group research note on the pros and cons of migration to Office 2000 states: "While these features are suitable for basic collaborative use, there are much better systems on the market that are more robust. We believe it will require at least two more generations before Microsoft can integrate its efforts on collaborative software into Office and create a complete enterprise offering."

There have been some minor compatibility issues with third-party applications, especially non-Microsoft web browsers. But otherwise, reactions to Office 2000 have been positive. Early signs are that it's more robust and reliable than previous versions. Most file formats and user interfaces are similar to those in Office 97, so upgrading and retraining should pose few problems.

The installation wizards, selective installation procedures and choice of versions (see box, page33) seem popular with customers, but upgrading poses a challenge for resellers, especially in telesales, and it's unlikely they would welcome any greater proliferation.

Features don't necessarily sell products, however, says Melanie Denton, senior research analyst at Romtec GFK. "A lot of the time, it doesn't matter what the features are. Many people buy Microsoft just because it's Microsoft."

Microsoft says more people bought Office 2000 in its first month on the shelves than bought Office 97 during its first month, and specialist software resellers such as Software Warehouse are reporting strong sales - mostly to hobbyists and SMEs, who always tend to be quicker off the mark than corporates. "For a Microsoft launch it's been quite successful," says Steve Bennett, managing director of Software Warehouse. "We easily beat our Microsoft sales target in June."

Still, no one has been trampled in the rush. Phillip Mitchell, managing director of reseller IntraLan, which specialises in SMEs, sees two main markets, the flush market - copies of Office 95 and older versions which are being flushed out during various millennium compliance projects - as well as the first-time buyers group.

"People buy it because it's the latest product, rather than because it has a lot of snazzy features," he says. "They're buying it because they need a licence anyway and it would be absurd to buy an older version. But Office 97 is much more powerful than most businesses need and I wouldn't expect anyone to say Office 2000 has features I want and I must upgrade."

Brooks hasn't sold a single Office 2000 licence, advising his SME customers to think through the implications first. "Most customers would like to move to it, but they're still getting to grips with their current software," he says.

Corporates show even more reluctance. "It's getting harder for Microsoft to convince users to upgrade, especially since they've had such strong distractions from the year 2000 and the euro," says Terry Ernest-Jones, research manager for European personal systems at research company IDC.

"We're getting a strong sense of wariness about upgrading hardware and software, especially among medium-to-large users, who are much more aware of the costs and heartache involved."

Despite claims by Microsoft about reduced cost of ownership, Gartner still thinks it's cheaper to stay where you are. "For all the money saved through self-healing and self-installation of uninstalled features, enterprises will spend up to five times as much on upgrading users, retraining them, updating procedures and rectifying in house applications built on previous versions," he says.

Most observers, including Gartner, believe that there is little to be gained in upgrading from Office 97 to 2000. Caunce says: "We think the market for Office 2000 will be corporates that are using Office 95. For customers using Office 97, we're looking at it case by case. Advanced users will see the internet and collaborative working features as good reasons to switch. But if they're happy with the way they communicate and collaborate, it's less compelling."

Most observers would therefore agree with Ashim Pal, senior analyst at Meta Group, when he says: "I don't foresee huge enthusiasm to go with Office 2000 this year. I expect next year to be busy, but it will probably be six months into next year before the dust has settled from year 2000 and sales pick up."

Windows 2000 is also due for release later this year. Aside from the name, there is no correlation between the OS and Office 2000, and Microsoft says even Office's more complex features, such as self-repair, will work on Windows 98, 95 and NT. Inevitably, the market will make some kind of connection and buyers may wait and upgrade both products together.

On the face of it, a suite of personal productivity applications appears to offer little opportunity for value-added sales, apart from some deployment planning and a little user retraining. Certainly, corporate resellers don't see Office 2000 as a high-margin bonanza. "There's no revenue or margin opportunity in this," says Eric Roth, market intelligence manager at ICL Multivendor Computing. "It's business as usual and we don't have a problem with that."

Unsurprisingly, perhaps, analysts have found little evidence of value-added sales. "Resellers are not adding much in terms of making deployment easier and making service sales on the back of Office 2000," says Pal.

"It's an opportunity they're missing out on."

But in the SME market, re-sellers are optimistic. "There is tremendous added-value potential," says Mitchell. "It has opened up a whole business area for the channel." Outlook 2000 has enhanced workflow automation features, which Mitchell believes offers such potential for bespoke development that IntraLan is setting up a company to do this.

The intranet and collaborative working elements of Office 2000 could also give rise to added-value sales as SMEs encourage many of their resellers to set up intranets for them.

Microsoft also believes Office 2000 offers more channel potential than Office 97. "We see a lot of value add, not only for developers, but for any of our partners that know something about programming," says Bennie.

Microsoft says it's increasingly trying to find ways for its value-added providers (Vaps) - smaller resellers who primarily service the SME market - to add value, now that margins on software are so thin.

By way of proof, in August, the company will launch a free kit for resellers to customise the Customer Manager application in the Small Business edition of Office 2000.

Users can't do this because everything is preconfigured. Microsoft will also release some 90 per cent finished Outlook applications, which resellers can fine tune for individual SMEs.

By and large, the vendor gets a thumbs-up for its handling of the launch.

The timing wasn't ideal - shortly before the summer lull and, more importantly, as the millennium is closing the door on many large sales. Microsoft originally wanted to launch late last year, but the software wasn't stable in time.

This way, there is time for evaluation copies to be bought, early adopters to spread the word and case studies to be compiled, ready for a bigger sales push next year.

Although things have been relatively quiet on the Microsoft's marketing front, the company appears to have done a good job of preparing the channel, with plenty of free induction courses, training materials as well as trained engineers on hand to provide around-the-clock advice. "Channel management and product availability have been very smooth," says Roth. Caunce adds: "We're happy, so far, with the support that Microsoft has offered to the channel."

The vendor has also been targeting smaller resellers this year with its Direct Access programme, aimed at the thousands of Vaps that don't qualify as certified partners. This gives resellers access to cheap training, software, sales and marketing materials, some technical support, plus up-to-date news-letters, websites and quarterly events. "Microsoft has done a better job than in the past, especially through its Direct Access programme," says Brooks.

Apart from the developer edition, which contains more products, pricing remains pretty much unchanged from Office 97, which has met with approval from the channel. List prices are usually academic anyway. This is because the vast majority of sales are through bulk licence schemes, such as Microsoft Select, or via OEM sales and upgrades.

Microsoft still permits upgrades from most previous versions of Office, as well as its MS Works integrated package. But with the launch of Office 2000, it has cancelled the opportunity to crossgrade from competitors' products, which these days are limited to Lotus Smartsuite and Corel Word-perfect Office.

Both of Microsoft's main rivals are developing componentised office suites based on Java applets, which could appeal to users who find the all-singing, all-dancing applications of Office 2000 too feature-rich and complex. But in the mainstream, they have effectively lost the battle to Microsoft, which has about 90 per cent market share. SME sales of Lotus and Corel are almost unknown and corporates tend only to buy more licences if they are already die-hard Lotus or Wordperfect shops.

Not that there's anything wrong with the competitors' software. "Technically, customers really have no reason to change, because most of the other products are quite as good from the users' point of view and these are often cheaper," says Roth. But increasingly, according to Gartner, they do change, often because they are receiving more and more emailed documents in Office formats from outside the company. File compatibility will also be a huge driver to upgrade from Office 95 and earlier versions.

Coping with its own success is going to be Microsoft's biggest problem in sales building. With a 90 per cent market share and 80 million copies of Office already sold worldwide, opportunities to expand the market are limited. "In the past, our competition was the likes of Lotus and Corel," says Bennie. "But increasingly, the competition is ourself and previous versions of our own products."

The result could be a tendency towards apathy among customers, since for many it doesn't really matter which version of Office they use. Does Microsoft care? Probably not. "Microsoft has not positioned Office 2000 as a revolutionary new product," says Roth. But then, he adds: "It probably doesn't feel under any pressure to get people to switch."

GOOD FEATURES, BAD FEATURES - WHAT'S WHAT WITH BILL'S LATEST OFFSPRING

Internet and collaborative working. Documents can be saved in web folders in HTML or XML format, which are treated exactly like Office's proprietary formats. This enables round tripping - reading HTML documents back into Office for editing.

Effectively, a live version of a document can be located on the web.

Comments and discussion notes can be added, web-style searches can be applied and users can subscribe to receive notification of changes and new documents. This can apply to Access databases, Outlook calendars and Powerpoint presentations as well as Word documents.

Installation and management. Install on demand automatically installs features when they are first used, saving users the bother of trying to guess which features they will need when they first install Office. Detect and repair claims to automatically fix problems such as missing or corrupted system files. Both should make life easier for support professionals.

General features. Collect and copy allows users to create a clipboard of up to 12 items at a time. Automatic Language Detection applies the correct spelling and grammar checkers to different languages. Short menus show most used commands.

Access (database). Data Access Pages allow users to save databases in web format - although these can only be accessed from Office 2000.

There is also SQL support, via a new file type called Access Project.

Outlook (time and contacts manager). Extra workflow automation features could form the basis for bespoke groupware-like applications.

Word (word processor). Mostly minor productivity enhancements, including an email button which emails the current document direct to a designated recipient, more HTML features, and more flexible table and printing features.

Excel (spreadsheet), PowerPoint (presentation graphics), Publisher (DTP) and FrontPage (web design) have received minor upgrades to features and appearance.

THE OFFICE 2000 RANGE AND PRICES

Office 2000 comes in no fewer than five different versions, depending on the applications included:

- Standard edition contains: Word, Excel, Outlook and Powerpoint.

Cost: £199 upgrade or £439 new

- Small Business edition contains: Word, Excel, Outlook and Publisher, plus three SME-focused business tools - Business Planner, Small Business Customer Manager and Small Business Financial Manager.

Cost: £199 upgrade or £439 new.

- Professional edition contains: everything in small business edition, plus Powerpoint and Access.